Information For Businesses In The CBD

CBD

Cordons are remaining in place and are being strictly enforced. CBD is likely to be closed for months. Police have advised that the central city cordon access point at the Bealey Avenue/Montreal Street cordon has been temporarily closed because of an unstable building. No access to the Art Gallery is possible at the present time.

Business

Employers need to have contacted as many of their staff as possible [via text] to ensure firstly their safety and secondly if they are able to assist the business in setting up. IT and business systems companies are working on methods to get people at least on line or some sort of computer function to be able to process payments to staff, suppliers and from customers. This is essential to enable business to continue as best it can.

Staff

Health and safety

Employers have duties under the Health and Safety in Employment Act to take all practicable steps to ensure the safety of their employees while at work. In many cases, experts (such as structural engineers, plumbers and electricians) will need to be called in to ensure the workplace is safe before staff return. Any racking or storage shelving should be checked for stability in case of any superficial damage and risks to employees.

Pay

In most cases, employers will also have a duty to pay normal pay, even if the employees have been prevented from working, and irrespective of whether they are waged or salaried. The determining factor is whether they are ready and willing to work. If so, then (subject to the terms of the applicable employment agreements) they must be paid. If an employer is not financially able to continue to pay wages, the parties may agree to a temporary discontinuance of work during which wages need not be paid. However, the express agreement of the employees will be necessary. The key for employers in such situations will be open communication with their employees as to the state of the business and the employer’s ability to continue to pay wages indefinitely. Employers should also consider obtaining employees’ consent to take annual leave. Where employees have accrued annual leave, and the parties have been unable to agree to when it shall be taken, employers can only require that annual leave is taken after providing 14 days’ notice. Financial help - emergency grants and civil defence assistance payments are available. Call the helpline of 0800 779 997 for more info. Banks and IRD have all pledged assistance where needed. So if you are under financial pressure talk with them and there is a good chance arrangements can be made.

Abandonment

Employment legislation does not specify a number of days before an employee is deemed to have abandoned their employment. An employer is not entitled to assume that because a worker has not reported for work, he or she has abandoned his or her employment. There can be many reasons why an employee may not turn up to work but has not informed the employer. Best practice suggests that, if an employee is not able to get into work and cannot let their employer know, they should ensure someone tells the employer on their behalf, so that the employer knows what has happened. If an employee has not reported to work and has not contacted the employer, the employer should try to contact the employee, in order to find out why they have not turned up. When contacting the employee, the employer should ask questions to find out whether the employee has actually abandoned the employment or if they have a valid reason for their absence. The employer should listen to the employee with an open mind. The employer should also consider any other information it has related to the employee's absence, such as medical certificates, or conversations with family members of the employee, in deciding whether there has been actual abandonment of employment. There may be a clause in their employment agreement which states that, after a specific number of days' unauthorised absence (typically three days); the employee may be required to provide medical certificates or undergo a medical examination or the employee's employment may be terminated. An employer cannot rely solely on such a clause to dismiss an employee, even if an employee has agreed to it. If an employer is going to end an employment relationship, they should act fairly and reasonably and have a good reason for doing so.

Infrastructure

Buildings

A red placard means the building is considered unsafe and further structural assessment is needed.

A yellow placard means the building has limited access, as noted on the placard, and further structural assessment is needed by the owners.

A green placard means the building is considered safe for its intended use.

A guide for Landlords and Tenants.

This is a brief guide to some of the considerations relevant to landlords and tenants using a standard form Auckland District Law Society (ADLS) lease (5th edition 2008). It is clear that dealing destruction will require the cooperation of the landlord, tenant and local authorities where remediation is undertaken.

TOTAL DESTRUCTION

If the premises or any portion of the building is destroyed or so damaged: (a) as to render the premises untenantable, then the lease term shall at once terminate; or (b) in the reasonable opinion of the landlord as to require demolition or reconstruction, then –within three months of the damage - the landlord can give 20 working days’ notice to terminate and a fair proportion of the rent and outgoings shall cease to be payable as from the date of damage. Sub-paragraph (a) provides that where the premises are untenantable termination is deemed to occur. Whether the premises are untenantable is a factual matter. Is it likely to be an area of contention between the landlord and tenant and is discussed in greater detail below. Sub-paragraph (b) gives the landlord the ability to terminate the lease where the destruction or damage is going to require demolition or reconstruction. In this scenario: (a) The landlord must undertake this assessment (acting reasonably), and notify the tenant within 3 months. (b) The notice to the tenant must give 20 working days’ notice to the tenant. (c) Rent and outgoings will reduce to a fair proportion from the date of damage. It is unclear whether the tenant can demand from the date of destruction a reduced rent or whether a tenant is obliged to pay full rent until termination. Removal of a tenant’s fit-out is not necessarily contemplated in the circumstances of destruction, however, we suggest a practical approach but with public safety paramount.

PARTIAL DESTRUCTION

If the premises or any portion of the building is destroyed or so damaged but not as to render the premises untenantable and: (a) the insurances have not been invalidated by actions of the tenant; and (b) all the necessary permits and consents are obtainable, then the landlord shall with all reasonable speed expend the insurance monies toward repair and reinstating the premises – but only to the extent of the insurance proceeds. This process will require constant contact and cooperation between the landlord and tenant, with the tenant also likely to want to lodge its building consent application for any fit-out work required. Any repair or reinstatement may be carried out by the landlord using such material and form of construction and according to such plan as the landlord thinks fit, and is satisfactory so long as it is reasonably adequate for the tenant’s occupation and use of the premises. Until completion of the repair or reinstatement a fair proportion of the rent shall cease to be payable as from the date of damage. If a permit or consent cannot be obtained or the insurance money is inadequate, then the lease shall at once terminate. While this provision is drafted as a deeming provision, it requires information from the landlord to assess whether the termination conditions have been triggered. Practically, we see that this area will need careful consideration from the landlord as they may be required to bring other aspects of the building up to the current Building Code standard as a result undertaking repair and reinstatement. This may increase the costs of repair and reinstatement beyond what is contemplated by their insurance policy.

UNTENANTABILITY

The key concept around determining the landlord and tenant rights with regard to damage or destruction is “untenantability”. This is an objective test. The test is essentially whether the premises have been rendered unfit for the occupation and use of someone assumed to want the premises for the same use as the tenant, or put another way, has there been a substantial interference to the tenant’s ability to enjoy, use and operate the premises? There is little case law around untenantability, and even those that are available typically relate to damage or destruction relating to fire damage.

TENANT LIABILITY

The above is predicated on the assumption that none of the damage or destruction was caused by the tenant. This may not be as obvious as it seems – where say, the tenant’s fit-out contributed to the damage or destruction then the tenant may be liable. An example of this might be a shelving unit was not properly fastened and collapsed causing damage to the landlord’s property. Also, if the lease is a net lease and item 5 of outgoings is not crossed out, the landlord is entitled to claim an insurance excess up to $500 as an outgoing from the tenant.

NOTIFICATION AND INSPECTION

The tenant must notify the landlord of any accident or defect in the premises promptly. Ideally photos should be taken to ensure evidence of damage, including so the date of damage is recorded. Tenants should remember that the landlord has a right of inspection at all reasonable times to view the condition of the premises.

LANDLORD WORK AND THE BUILDING ACT 2004

The landlord has right of access for repairs to the premises or adjacent premises but with the least possible inconvenience to the tenant. During the term, the landlord must not give any consent to work or undertake work which would put the tenant in breach of section 363 of the Building Act 2004. Section 363 of the Building Act 2004 provides that it is an offence for owners, occupiers and people who control premises to permit people to use those parts of premises intended for public use that are affected by building work. It applies where a code compliance certificate or certificate for public use has not yet been issued, or where building work has been undertaken without a building consent. Public use may extend to areas open to the public and which are typically not secured by card, key or other means of restricted access. Open foyer areas, retail areas or pedestrian areas in shopping malls are likely to be areas of public use.

FINAL COMMENTS

In this time of great uncertainty for landlords and tenants alike, good communication is the key. In many instances, this communication will need to be ongoing to navigate the contractual and statutory obligations.

Contracts

Doctrine of frustration

Contracts can be terminated under the ‘doctrine of frustration’ in certain conditions, absolving the business from the need to perform the contractual obligation. The trigger must be an unforeseen event, not caused by either party’s default and which has created such a change in the circumstances of the contract as to render its performance either impossible, or radically different from what was contracted for. The doctrine is most often used in respect of commercial contracts, but the Employment Court recently applied it to an employment agreement. The Court stated that the doctrine is not to be invoked lightly, but should be applied where the facts of the case warrant the intervention of the law to avoid injustice1. If it applies; it will terminate an employment contract even where employees are ready, willing and able to perform their employment obligations.

Force majeure

Contracts sometimes provide for what will happen in an event like an earthquake in a “force majeure clause”. Typically the party attempting to rely on the clause will be required under the contract to first give notice to the other party. Note also, that a force majeure clause may only relieve parties of their obligations to the extent that they have been affected by the earthquake. A contract could not be terminated, for example, if goods cannot be delivered on time due to damaged roads, but it would be satisfactory to deliver them at a later date. Ref: Chapman Tripp